Amid all the negative publicity that Solyndra’s failure has brought to the Administration’s cleantech efforts, one cleantech program has received broad bipartisan support: DOE’s Advanced Research Projects Agency – Energy (ARPA-e). In 2012, ARPA-e will receive $275 million, a 53% increase from the prior year with both the House and the Senate supporting significant funding for the agency’s third year of operations.

ARPA-e is modeled after the Defense Advanced Research Projects Agency (DARPA), which for over 50 years has funded early-stage research projects that show the potential to develop technologies that could yield disruptive advances for the military. DARPA’s projects have resulted in major leaps including, but definitely not limited to, the Internet, stealth technology and the Global Positioning System. Both agencies operate by soliciting proposals from companies, universities, and labs within broad thematic areas and select the most promising proposals for grant awards.

Readers of my blog know that I am not a big fan of some of the Administration’s cleantech efforts. ARPA-e is at least one exception. Authorized in the last year of the Bush Administration and initially funded through the Obama Administration’s American Recovery and Reinvestment Act (ARRA), the ARPA-e program may be one government program that can help seed the disruptive advances needed in our energy economy.

Why, given the negative publicity around government funding for cleantech projects, has ARPA-e been able to win bipartisan support?

Focus on early stage R&D
Government-funded R&D has long been an area of bipartisan support. Most members of Congress believe (as do I) that the government has a role in funding early-stage research and innovation in areas of public interest where the private sector is unable to economically justify conducting such R&D given the high degree of risk. Unlike the DOE loan program that funded Solyndra’s factories, the purpose of the ARPA-e grants are to fund high-risk, high-reward R&D projects that industry alone cannot support, but whose success could dramatically benefit the nation.

Grants (of reasonable size) not investments (of enormous size)
The bulk of the Administration’s cleantech investments were funded through the ARRA including the initial funding for ARPA-e. Since ARRA’s purpose was to stimulate the economy, government agencies, including DOE needed to get funds out the door as quickly as possible (unfortunately this failed). That led to many extremely large awards of both grants and loan guarantees. Just a few high profile examples — $527 million to Solyndra (bankrupt), $465 million to Tesla, $249 million to A123, $76 million to Range Fuels (bankrupt), $43 million to Beacon Power (bankrupt) and $25 million to Amyris. Some of these awards were grants; others were loans where the government hoped to get a return on its investment.

Unlike many other programs handing money out for cleantech related efforts, ARPA-e’s awards have all been grants made with the clear understanding that they are for high-risk R&D that often will not work out. In no case is there an expectation of a financial return to the government. Anytime a government program expects to make a return on investment it is, in my opinion, likely to fail both because the government is inherently flawed at making good business decisions and because politics usually won’t allow for even a single failed investment.

ARPA-e grants to date have averaged $2.9 million and have gone to 180 different projects. As a result, ARPA-e largely avoids the minefield of government trying to play businessman as well as the negative PR fall-out from large project failures. In addition, while politics can play a role in any grant process, the smaller the awards the less potential for political influence to outweigh project merit.

Energy Independence & Global Warming
ARPA-e’s guiding legislative mandate is to enhance the economic and energy security of the United States through the development of technologies that reduce energy imports, reduce energy-related emissions including greenhouse gases, and improve energy efficiency in all economic sectors. By combining the goal of energy independence with reduced greenhouse gas emissions the program is able to appeal to a much broader array of elected officials. If the program only focused on reducing greenhouse gases, I strongly suspect there would be much less support from Republicans. By avoiding the polarizing nature of focusing only on global warming or only on energy independence, ARPA-e is able to appeal to a broad audience.

One of the best ways to help solve our energy challenges is through disruptive energy technologies. If ARPA-e can deliver for energy technology even close to how well DARPA has delivered for defense technologies it will ultimately have a large impact on the economy, energy security and the environment. To achieve this, ARPA-e must remain nimble and avoid being sucked into the massive DOE bureaucracy. If it is able to do so, I suspect it will continue to have bipartisan support and will be a long-term shining star in the Administration’s cleantech efforts.

(Note: ARPA-e will hold their annual Innovation Summit February 27-29)

David Gold heads up cleantech investments for Access Venture Partners. He is also the author of the GreenGoldBlog.

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With the aim of fomenting renewable energy within academia, the Fundación IBERDROLA, which is kept by renewable energy giant Iberdrola, has announced the first round of its program of scholarships for postgraduate studies in energy and the environment at academic centres in the United Kingdom and the United States.

IBERDROLA will grant up to 14 scholarships for the 2011/ 2012 academic year. Graduates or students in their last year of an undergraduate degree and with Spanish, British or U.S. nationality are eligible to apply.

The main criteria is that the recipients should focus their study on areas linked to renewable energies, sustainable energy systems, the environment and biodiversity, clean carbon technologies, emissions management and carbon capture, energy efficiency, energy storage, electric vehicles or smart grids.

Students have to choose from six institutions: Imperial College London, Edinburgh University and Strathclyde University in the United Kingdom, and in the United States from the Massachusetts Institute of Technology (MIT), the Rochester Institute of Technology or the University of Maine.

The grants cover $2,100 per month as well as the registration fee. Applicants will be assessed for their academic grades, resumé, interest in intended studies and letter of reference from candidates’ referees. The deadline to enroll is March 21st.

For more information, visit the Fundación IBERDROLA website.

Article by Antonio Pasolini, a Brazilian writer and video art curator based in London, UK. He holds a BA in journalism and an MA in film and television.

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In the latest installment of green energy finance, I will address government incentives and other programs.  I will also highlight some factors that may make green incentives go from rare bird to endangered species. 

As always,  I am not a finance professional, and the goal of these posts is simply to give a high-level overview of government incentives.  As with all financial decisions, please consult your financial professional and attorney for advice specific to your project. 

The Good News About Government Incentives

1. Programs are available at almost all levels of government–The Federal government offers grants, tax breaks, loan guarantees and technical assistance for green building and renewable energy components of commercial, residential and industrial projects.  The Office of Energy Efficiency and Renewable Energy has a pretty user friendly site. States also run incentive programs, and many states have renewable energy credit trading programs (also known as RECs or green tags or SRECs, etc.) which enable producers of renewable energy to get an extra stream of income from their property. For special groups, like Native American Tribes and Veterans, additional resources are available.
2. Some programs come from unusual sources–Not all green building and renewable energy incentives come from government.  Utilities sponsor a lot of programs for both commerical and residential projects (for example, see the programs available from PECO here).  Some non profits and even faith-based organizations are providing green incentives.  A loyal Twitter follower highlighted this program by the Jewish Free Loan Association (available to those of any faith) that provides interest free loans of up to $5000 for energy efficient upgrades for homes and small businesses in the Los Angeles area.
3. Don’t neglect technical assistance programs– One of the most underutilized incentive is technical assistance. Of course, homeowners and businesses can access technical assistance programs, but also municipalities, small businesses  and Native American Tribes can get thousands of dollars in technical assistance for free or reduced cost.  For example, in New York Con Edison provides small businesses with a free energy audit. This can ensure you maximize the benefit of your green project both environmentally and financially. 

And The Bad News

1. The new House is seeking to cut almost all Federal green incentives–According to Green Building Chronicle,The Republican Study Group, made up of more than 100 GOP House members, is targeting the wholesale elimination of funding for:

• Department of Energy Grants to States for Weatherization, $530 million annually;

• EPA’s Energy Star Program, $52 million annually; and

• federal office space acquisitions (which have helped the government build a market for LEED-certified buildings), $864 million annually.

Just to be clear, in a bill seeking $2.5 TRILLION in cuts, these total savings would account for .14% of the savings.

2. States and municipalities are strapped for cash–Like the Federal government, states and municipalities are strapped for cash, and may cut their green incentives to provide things like trash pick up and police.  
3. Some programs are not worth the effort to apply–All programs require paperwork, verification and in some cases, prevailing wage rates.  Sometimes the benefit is not worth the hassle.  
4. Some programs reward green bling rather than cost effective green improvements–Some programs reward the installation of renewable energy components or other "green bling" as opposed to better  insulation or new windows.  It is key to do a cost benefit analysis of any proposed green project to ensure that it has the greatest return on investment.

For more information, the DSIRE database of Federal and state renewable energy and energy efficiency programs is always useful, and be sure to check your state and local environmental departments and local utilities.

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Since January 1st, the British Department of Transport started to issue grants of £5,000 (US$7,724) to purchase electric vehicles (EVs) as part of a larger, £400 million (US$618 million) drive to reduce emissions from road transport.

In response to the initiative, the Electrical Contractor’s Association (ECA) has issued a statement expressing concerns related to infrastructure.

“Whilst I welcome the introduction of the Electric Vehicle (EV) grant, for EVs to be truly successful we must first make sure we have the infrastructure in place. This means having enough charging points throughout the country; all with a common installation standard, to ensure that they work properly” said Steve Bratt, ECA’s CEO.

ECA represents 3,000 member companies involved in electrical installation work with a combined turnover of £5 billion (US$7.72 billion) and 30,000 staff. Its main mission is to promote safety, training, qualification, technological development and industry performance.

“If this initiative is successful, and the number of EVs on the road does increase significantly, it will be vital that the National Grid can cope. As without the correct infrastructure, the public could be left stranded as their car runs out of electricity. Before the Government takes steps to incentivise the purchase of electric cars, it first needs to address the issues which stand in the way of their future success. If we’re not careful we could see a rerun of battery cars, which became an object of media and popular ridicule during the 1980s”, added Bratt.

The first nine models to become eligible for grants are Mitsubishi iMiEV, smart fortwo electric drive, Peugeot iON, Citroen CZero, Nissan Leaf, Tata Vista EV, Toyota Prius Plug-in, Vauxhall Ampera and Chevrolet Volt. More will be added in 2011.

Article by Antonio Pasolini, a Brazilian writer and video art curator based in London, UK. He holds a BA in journalism and an MA in film and television.

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Many are aware of the subsidies, tax credits, and grants available to property owners and utilities to install and utilize alternative energy (i.e., wind, solar, biomass, etc.). Unfortunately, many forget that these technologies need to be manufactured somewhere. The majority of the panels that go into a photovoltaic array and the large blades that make up wind turbines are currently being manufactured overseas, often in China. This directly contradicts President Obama’s plan to spur green job growth with the passage of the Stimulus Bill. Enter the Security in Energy and Manufacturing Act (SEAM Act).

Under the proposed SEAM Act, the Advanced Energy Manufacturing Tax Credit (MTC), an existing tax credit, which provided a 30% of total project cost credit to help fund projects that expanded, or re-equipped clean energy manufacturing plants would be extended. The SEAM Act goes beyond a simple extension of the $2.3 billion program, it redefines it. Infusing an additional $5 billion into the program while substituting grants for tax credits, it will allow smaller startups who haven’t garnered the tax liability to apply for tax credits to offset some of the costs of their planned plants. It also prioritizes purely manufacturing projects over assembly plants.

This Act comes at a key time, as there are hundreds of projects that applied for credits under MTC that were denied because funding ran out so quickly. Like the “Cash for Clunkers” program, the actual interest in MTC far outweighed initial projections, proving that it was a successful program.

But why, you might ask, should we focus on clean technology manufacturing. According to the Act’s author, Representative Phil Hare from the 17th congressional district in Illinois,

“As clean energy becomes one of the world’s largest industries, forecasted at over $2 trillion annually, advanced energy manufacturing will offer one of the best chances for the U.S. to restore its manufacturing base and create good-paying jobs domestically.”

This is one of many reasons why the US needs to spur clean manufacturing jobs. Over the past several decades this nation has seen its manufacturing base erode. Losing out to cheaper Chinese products, the manufacturing industry, one of the largest employment sectors in the US has seen the largest decline in jobs over the past ten years. According to the United States Department of Labor, in 1998, the manufacturing sector employed the second highest number of workers, over 17.5 million. Since then, the industry has seen a 2.6 percent annual decrease in jobs, which is double the rate of decline of the next-to-worst sector. Advanced energy manufacturing offers a unique opportunity to pursue an environmentally responsible agenda while creating many permanent, high-paying jobs that are desperately necessary to revive an employment powerhouse in serious decline. With the promise of huge green job creation numbers to live up to, why not focus on the area of biggest potential.

The demand side makes an even stronger case to up clean technology manufacturing. With the new requirement that 25% of each state’s energy portfolio must come from clean, renewable energy being considered in Washington and the potential for a cap and trade system, the demand for large solar and wind farms will take off. Couple that with the improvements that are being made to the efficiencies of these technologies pushing them towards being on par with coal in terms of the production price per kW, and you start to have not only an environmental reason and a government mandated reason, but also an economic reason. Maybe the one positive that came of out of the recent oil spill in the Gulf, is that it quieted some “Drill baby Drill” proponents. Clearly an increase in off-shore drilling is not the answer to our energy situation; why not look to an abundant and everlasting source, the sun, which creates not only solar power, but wind power as well.

At present, renewable energy production is already taking off. According to the U.S. Energy Information Administration, over the past ten years, wind energy production has increased an average of 24% annually. Over that same time period, energy production from crude oil has decreased an average of 2.4% annually. While crude oil reserves are running out, the potential for wind and solar production is only increasing. Let’s start focusing our efforts and our money on a sector that has some potential. For those of you who wonder where all this money could come from, look no further than the oil industry. The oil industry has received significant subsidies from the government so they can continue searching for an archaic fuel source that is destroying our environment. Greenpeace estimates the oil industry receives between $15 billion and $35 billion a year from taxpayers in the form of avoided taxes.

photo: OregonDOT

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The Department of Energy, under its Smart Grid Investment Matching Grant Program, provides reimbursement of 20 percent of qualifying smart grid investments.

Qualifying costs include, but are not limited to, certain manufacturing related costs, software that enables computers or other devices to engage in smart grid functions, and metering devices, sensors, and control devices that are capable of engaging in smart grid functions.

Recently, questions have been raised as to whether the DOE grant under this program is subject to federal income tax.

The IRS, in Revenue Procedure 2010-20, concluded that the DOE grant is not subject to federal income tax.

In Rev. Proc. 2010-20, the IRS noted that the DOE grant is considered a contribution to capital that is not subject to tax under section 118 of the Internal Revenue Code. Section 118 of the Internal Revenue Code provides that, in the case of a corporation, gross income does not include a contribution of capital to the corporation.

In particular, the Treasury regulations related to Section 118 highlight that contributions to capital include contributions made by a person other than a shareholder, for example, a governmental body for the purpose of enabling the corporation to expand its operating facility.

The corporation receiving the DOE grant must however reduce the basis of the property to which the DOE grant relates to. For example, if a corporation purchases a smart grid related device for $1,000 and receives a DOE grant under the Smart Grid Investment Matching Grant Program in the amount of $200, the basis of the device shall be reduced by the DOE grant amount.

The resulting basis of $800 is the basis of the property for purposes of depreciation.

Rev. Proc. 2010-20 becomes effective March 10, 2010 and does not apply to non-corporate taxpayers or to DOE grants related to smart grid research, development, and demonstration.

photo: Ian Muttoo

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The Obama administration is awarding $3.4 billion in grants to modernize the national electric grid. One-hundred companies, utilities, manufacturers, and cities will receive the grants — ranging from $400,000 to $200 million — for projects that help build a “smart” grid that cuts energy costs, reduces blackouts, and has the capacity to deliver more wind and solar energy to American homes and businesses. Calling the nation’s grid system “dilapidated,” Carol Browner, the Obama administration’s top adviser on climate and energy issues, said federal funds would be used to expand the national grid and make it work more efficiently.

Among the award recipients are Baltimore Gas and Electric Company, which will get $200 million to implement a “smart” meter network for its 1.1 million customers, enabling them to better manage energy use in their homes. The San Diego Gas and Electric Co. will get $28.1 million to install 1.4 million smart meters. The administration’s announcement represents the biggest single-day award of funding from the $787 billion economic stimulus package.

Article appearing courtesy of Yale Environment 360

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The federal government has made it abundantly clear that they want the upcoming plug-in and electric vehicles to succeed. The government has awarded $2.4 billion in stimulus funds for the manufacture of vehicles and their components as well as to establish a vehicle charging infrastructure.

Among the grants is funding for establishing 12,500 charging stations across five states. Another 2,550 charging stations could be becoming very competitive in installing public charging stations. Also, big box retailers are expected to offer free charging to encourage people to shop and recharge their batteries.

But government agencies need to walk a fine line in building out the electric vehicle charging infrastructure. The government is keen on eliminating “range anxiety” — the fear that an electric vehicle might run out of battery power before it can be recharged — that could discourage consumers from buying electric vehicles. (Extended range vehicles such as the Chevrolet Volt can tap the gas tank, so it’s less of a concern.)

But if charging is readily available for free or at very low cost it could discourage the private sector from getting involved. The actual cost of the electricity to recharge a vehicle is on the order of $1 or so, depending on where you live. Charging equipment companies such as Coulomb want to sell to retail establishments, such as restaurants, shopping malls, and parking garages that would recoup their investment by charging access fees. (To date there’s been little investment in private charging stations, which is understandable as the vehicles won’t arrive for another year.)

At $3,000 or more for a charging station, it will take a lot of vehicle charge sessions to recoup the investment. If people can charge at home for less than that or at free public stations, they may balk at having to pay several dollars for a charge. Therefore, privately owned stations could have a hard time attracting customers, or may only be able to charge a buck or two, which could make it very challenging to turn a profit.

So there’s the conundrum — too little public charging, and people may not buy the vehicles. But if people get used to charging for next to nothing, private charging networks may not get off the ground.

Appearing courtesy of Matter Network.

[photo credit: Flickr]

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In a move that will surely provide an additional boost for the alternative energy industry, and perhaps T. Boone Pickens‘ plan, the US Department of Treasury has finally released guidelines for claiming the grants instead of the federal tax credit. Applications will be submitted online. However, the Treasury will not be accepting applications at this time.

The American Recovery and Reinvestment Act passed in February allowed for business taxpayers to apply for direct payments instead of claiming a tax credit on their income tax return. This applied to the credit under Internal Revenue Code (“IRC”) Section 45 (Energy Produced for Certain Renewable Resources) and IRC Section 48 (Energy Credit). Property that applies to this includes geothermal, biomass, micro wind turbines, and solar amongst others.

While the guidelines and terms and conditions are too numerous to mention, here are a few highlights:

The grants apply to property which is “placed in service” during 2009 and 2010. The grant is also available to property, which is placed in service after 2010 where construction began in 2009 of 2010 so long as the application is submitted before October 1, 2011.

Once the completed application is submitted to the IRS, the IRS will make a payment to qualified applicants within 60 days. However, the IRS will only make a final determination and payment if the property is placed into service. You can send an application in early, but you will have to provide supplemental information to the Treasury within 90 days after the property was placed into service.

Lessees of qualified property can also claim the grant, however the lessor must expressly disclaim any rights to the grant and the applicable federal tax credits.

Supporting documentation such as final engineering design documents stamped by a licensed professional engineer and other specified documentation is required. If the cost basis of the property exceeds $500,000, an independent accountant’s certification attesting the accuracy of all costs claimed as part of the basis must be submitted.

REIT’s are eligible to receive the grants as long as they meet other requirements set forth by the Department of Treasury.

In addition to the application procedures, those who ultimately qualify and obtain the grant monies must file an annual project performance report.

The full terms and conditions, guidance, and sample application are available at the Department of Treasury.

[photo credit: flickr]

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